Economy

US: Service sector slows in Mar; inflation cooling. The US services sector slowed more than expected in Mar as demand cooled, while a measure of prices paid by services businesses fell to the lowest in nearly three years, giving the Fed a boost in the fight against inflation. The Institute for Supply Management (ISM) said that its non-manufacturing PMI fell to 51.2 last month from 55.1 in Feb, which accounts for more than two-thirds of the economy. (Reuters)

US: Trade deficit widens in Feb as goods exports fall. The US trade deficit widened more than expected in Feb as exports of goods declined, suggesting that trade could drag on economic growth in the first quarter. The trade deficit increased 2.7% to USD70.5bn. Data for Jan was revised to show the trade gap widening to USD68.7bn instead of USD68.3bn as previously reported. Economists had forecast the trade deficit rising to USD69bn. Exports fell 2.7% to USD251.2bn, likely reflect slowing global demand as well as the US dollar’s past appreciation, which is making US-made goods less competitive on international markets. (Reuters)

US: Private payrolls miss expectations in Mar. US private employers hired far fewer workers than expected in Mar, suggesting that the labor market was cooling. Private employment increased by 145,000 jobs last month. Economists had forecast private employment increasing 200,000. Data for Feb was revised higher to show 261,000 jobs added instead of 242,000 as previously reported. The labor market is slowing as higher borrowing costs dampen demand in the economy. The government reported on Tuesday that there were 9.9m job openings at the end of Feb. Still, there were 1.7 job openings for every unemployed worker in Feb, attesting to the labor market’s tightness. (Reuters)

EU: German factory orders growth accelerates; private sector expands for second month. Germany's factory orders growth accelerated in Feb driven by higher demand for motor vehicles and automobile engines and the overall private sector expanded for the second straight month in Mar reflecting the upturn in the service sector. In a joint economic forecast, the leading think tanks said Germany's economic setback in the winter half of 2022/2023 is likely to have been milder than feared. Factory orders grew 4.8% on a monthly basis, much faster than the 0.5% revised rise in Jan. (RTT)

EU: Eurozone Private Sector Logs Biggest Growth In 10 Months. Eurozone private sector activity expanded at the fastest pace in ten months in Mar underpinned by the pickup in manufacturing output and a strong upturn in services activity, thus diminishing fears of recession at the start of the year. The final composite output index rose to 53.7 from 52.0 in Feb. However, the score was below the preliminary estimate of 54.1. The reading remained above the critical 50.0 threshold for the third successive month and suggested the biggest growth in the private sector since May 2022. The indicator had slid into a near two-year low in Oct last year when concerns about the energy crisis were pronounced. (RTT)

UK: Service firms report second month of growth as prospects improve. Britain's economy looks set to have grown in early 2023 after firms in the dominant service sector in Mar reported the strongest new business expansion in a year and the best export performance since at least 2014, an industry survey showed. Adding to signs of recovery in the economy, Wednesday's final reading of the S&P Global/CIPS UK Services PMI of 52.9 was below Feb's 53.5 but above the 50 mark denoting growth for a second month in a row.. (Reuters)

Japan: Mar service-sector grows at fastest rate in over nine years. Japan's services sector activity grew at the fastest pace in over nine years in Mar, suggesting that the post-COVID bounce was gathering steam and providing some offset to a still-weak factory sector. The final PMI rose to a seasonally adjusted 55.0 last month, from Feb's 54.0, marking the quickest rate of expansion since Oct 2013. It was also higher than the flash reading of 54.2 and well above the 50-mark that separates expansion from contraction for a seventh straight month. (Reuters)

Japan: Economy runs below capacity, low rates may stay in place. Japan's economic output ran below full capacity for the 11th straight quarter in Oct-Dec, suggesting that conditions for ending ultra-low interest rates have yet to fall into place. Japan's output gap, which measures the difference between an economy's actual and potential output, stood at -0.43% in the fourth quarter, widening from -0.08% in Jul-Sep, BOJ data showed. Japan's economy expanded by an annualised 0.1% in the Oct-Dec period, only narrowly averting a recession as capital expenditure and consumption remained weak. (Reuters)

Thailand: Headline inflation lowest in 15 months, to fall further. Thailand’s headline inflation cooled to its lowest rate in 15 months in Mar and came in below expectations due to lower energy and food prices, with the trend likely to continue this year. The headline CPI rose 2.83% in Mar from a year earlier, compared with a forecast rise of 3.30%, and against Feb’s 3.79% increase. The core CPI index was up 1.75% in Mar from a year ago, the slowest pace in 14 months and under a forecast increase of 1.82%. (Reuters)

Markets

KPJ Healthcare (Outperform, TP: RM1.25): Teams up with Samsung Electronics to advance precision medicine in Malaysia. KPJ Healthcare and Samsung Electronics Co Ltd have entered into a collaboration aimed at advancing precision medicine and diagnostics in Malaysia. The two groups plan to explore innovative technologies and collaborative opportunities over the next six months via a MoU signed on Wed (April 5). LAC Medical is a leading provider of medical equipment, devices and biomedical services in Malaysia. (The Edge)

G Capital: Proposes four-for-one RCULS rights issue to raise up to RM112.88m. G Capital (GCAP) has proposed to issue up to 1.41bn redeemable convertible unsecured loan stocks (RCULS) at eight sen each on the basis of four RCULS for one existing ordinary share. The proposed rights issue will raise up to RM112.88m under the maximum subscription level. Proceeds from the exercise will be used to part-finance project costs (from RM4.75m up to RM100.42m) and for working capital requirement. (The Edge)

Tek Seng: Buys three parcels of land in Penang for RM34m. Tek Seng Holdings is buying three parcels of freehold vacant land in Seberang Perai, Penang for RM33.96m. Wangsaga Industries SB (WISB) is acquiring a 4.8765 ha plot of land from Bagan Specialist Centre SB for RM26.98m. WISB is also acquiring a 0.39 ha plot for RM2.18m, and another 0.86 ha for RM4.8m. (The Malaysian Reserve)

Tanco: Scraps issuance of preference shares worth RM100m to Socso. Tanco Holdings has aborted a plan to raise RM100m through an allotment of 100m redeemable preference shares (RPS) of RM1 each to the Social Security Organisation (Socso). Tanco received notification from Sosco of the parties' inability to finalise and execute the transaction documents on or before the cut-off date of March 31, 2023 and as prescribed in the terms of the supplemental term sheets. (The Edge)

Infomina: Appointed to build company data extraction platform for SSM. Infomina has announced the receipt of a LoA from SSM appointing the company as the service provider for the platform. Under the contract, the platform will facilitate the public in searching, extracting, and purchasing data on companies and businesses registered with SSM. The appointment is for a period of 6 years which Infomina will charge a service fee based on the actual consumption of the platform. (Business Today)

Opcom: Agrees on termination of project consultancy role with VC Telecoms. Opcom Holdings, through its 60% wholly owned subsidiary Opcom Vision SB, has mutually agreed with VC Telecoms SB to terminate its role as a project consultant for VC Telecoms, effective from Wed (April 5). The termination was due to a delay in the design and consultation for the data centre for the POP1 project, which is expected to expire on April 11. (The Edge)

Signature International: To buy 45% stake in Zig Zag Builders for RM13.1m. Signature International has entered into a conditional SSA with Foo Khai Shin to buy a 45% stake in Zig Zag Builders (M) SB for RM13.1m. The purchase of to 450,000 shares in Zig Zag will be funded with internal funds. Zig Zag is principally involved in the business of interior design, renovation, furnishing, installation, and maintenance and construction works. (StarBiz)

Market Update

The FBM KLCI might open lower today as US government debt rallied on Wednesday, pushing Treasury yields to their lowest level in seven months, after investors digested weaker than expected reports on the US labour market and services sector. Yields on two year Treasuries, which are more sensitive to monetary policy, and 10-year Treasuries both fell 0.02 percentage points to 3.31% and 3.79%, respectively, moderating from gains earlier in the session. Equities slipped in the session, with the blue-chip S&P 500 losing 0.2%, as investors appeared to eschew growth stocks for more defensive sectors, which tend to be more resilient in a downturn. The Nasdaq Composite declined 1.1%. The moves followed a duo of soft economic reports that added to signs the US economy and labour market are losing momentum. Payroll processor ADP said private businesses in the US created 145,000 jobs in March, below forecasts of 200,000. A separate report from the Institute for Supply Management showed the vast services sector cooling last month, with a deceleration in its employment sub-index. Earlier this week the labour department said job openings in the US fell in February to the lowest level in nearly two years. The latest data suggests the tight US labour market, which has been a major factor fuelling high inflation, is beginning to show signs of slack. European stocks also lost ground on Wednesday. The region-wide Stoxx 600 fell 0.2%, while Germany’s Dax lost 0.5% and France’s CAC 40 slipped 0.4%. London’s FTSE 100 rose 0.4%.

Back home, Bursa Malaysia's main index pared most of its earlier losses to close almost flat on Wednesday, due to a lack of buying catalysts, amid cautious sentiment on the back of mixed signals from global markets. At the closing bell, the FBM KLCI had eased 0.06 of a point to 1,429.55, from Tuesday's closing at 1,429.61. In the region, the Hang Seng index closed down 0.7% while China’s CSI 300 gained 0.3%.

Source: PublicInvest Research - 6 Apr 2023